Cruise Connections Charter Mgmt. 1, LP v. Attorney Gen. of Canada, Civil Action No. 08–2054 (RMC).

• Decision Date: 09 September 2013
• Docket Number: Civil Action No. 08–2054 (RMC).
• Citation: 967 F.Supp.2d 115
• Parties: CRUISE CONNECTIONS CHARTER MANAGEMENT 1, LP, et al., Plaintiffs, v. ATTORNEY GENERAL OF CANADA, et al., Defendants.
• Court: U.S. District Court — District of Columbia

967 F.Supp.2d 115

CRUISE CONNECTIONS CHARTER MANAGEMENT 1, LP, et al., Plaintiffs,
v.
ATTORNEY GENERAL OF CANADA, et al., Defendants.

Civil Action No. 08–2054 (RMC).

United States District Court,
District of Columbia.

Sept. 9, 2013.

[967 F.Supp.2d 118]

Cathy A. Hinger, Louis J. Rouleau, Womble Carlyle Sandridge & Rice, PLLC, Washington, DC, David J. Mazza, Womble, Carlyle, Sandridge & Rice, PLLC, Jack M. Strauch, Jessie C. Fontenot, Jr., Stanley B. Green, Strauch Fitzgerald & Green, P.C., Winston–Salem, NC, for Plaintiffs.

John M. Townsend, Scott H. Christensen, Corinne O'Hayer Lane, Hughes Hubbard & Reed LLP, Washington, DC, for Defendants.

OPINION
ROSEMARY M. COLLYER, District Judge.

TABLE OF CONTENTS

I.
FACTS
121

A.
The Parties
121

1.	Plaintiffs	121
2.	Defendants	122

B.	April 2008: The RFP	122
C.	April and May: Exchanges with Cruise Lines Prior to Bid	126
D.	Late May: CCCM Prepares for Bid	127
E.	May 23: The CCCM Bid	130
F.	May 30 through June 26: CCCM Awarded Contract; Discussions About Payment and Taxes Begin; June 3 Meeting	132
G.	June 29 through July 14: Negotiations Continue; Bank Involved	136
H.	July 15 and 16: Agreement on Project Services Agreement# 1	140
I.	July 16 through 18: Discussions Shift to Articles of Agreement; First Draft of Articles of Agreement and Feedback	142
J.	July 24 through 27: Internal CCCM Discussions Prior to RCMP Meeting	144
K.	July 28, 2008 Meeting and Second Draft of Articles of Agreement	145
L.	July 30 and 31: Negotiations Over Second Draft of Articles of Agreement	147
M.	July 31: Executed Version of Articles of Agreement	151
N.	July 31 through August 19: CCCM Refocuses on Cruise Lines	154

1.	Negotiations with Holland America Start Well	155
2.	Negotiations with Carnival Stall; CCCM Considers Royal; Caribbean	155
3.	Holland America and Royal Caribbean Raise More Tax Concerns	156

O.	August 20 through 27: Bank Financing Talks Stall; RCMP Ship Tour; Tax Issues Escalate	159
P.	August 25 through September 5: Tax Issues Continue to Escalate	162
Q.	September 5 through 8: Discussions with Canadian Revenue Agency; Financing Approved	167
R.	September 9 through 12: Parties' Discussions on Canadian Taxes	170
S.	September 10 through 13: Charter Agreements and Tax Terms Negotiations With Cruise Lines; RCMP Asks to Raise Contract Amount; Holland America Proposal	173
T.	September 15 through 23: CCCM Proposes Contract Clarification; Further Involvement with CRA; CCCM's Lawyers Involved; Negotiations with Royal Caribbean	177
U.	September 26 through 30: Normande Morin Replaces Kelly; Meikle as RCMP Contracting Authority; Contractual; Relationship Begins to Break Down	180
V.	Evening of September 30: CCCM Prepares Nomination; Documents	183

1.	Discussion of Nomination of Ships by Class	183
2.	September 30 E-mails Preparing Nomination Documents	185

W.	October 1: CCCM Responds to September 30 Letter & Nominates Ships	189
X.	October 2 through 6: RCMP Response to Nomination; Renewed Discussions with Cruise Lines; RBC Sends Formal Conditional Credit Offer	192
Y.	October 9 through 15: Increased Urgency Leads to Frayed; Relationships	195
Z.	October 16 through 23: Despite Resolution on Some Issues,; Disputes Over Taxes and CPA Review Continue	196
AA.	October 24 Meeting; RCMP States that 90% Letter of Credit Requirement Is Reimposed, Then Re-waived	199

BB.	October 28: Threatening to “Walk Away,” CCCM Demands; Assurance on Three Issues	204
CC.	October 29 through November 7: RCMP's Response; Final Royal Caribbean Charter Party Agreement; Attorneys Involved; the Bank Withdraws Financing; Final Holland America Charter Party Agreement	206
DD.	November 10 through 17: Contract Termination	212
EE.	Late November: CCCM's Actions Post–Termination	215
FF.	November 28 through April 2009: RCMP Issues New RFP and Contracts Directly with Cruise Lines	215

1.	Revised RFP	216
2.	RCMP–Holland America Charter Party Agreement	216

GG.
Post Facto Issues
217

1.	The Sessions Letter of Credit	217
2.	The Health Scores	217

HH.
Procedural History
218

II.
LEGAL STANDARD
219

A.	Summary Judgment	219
B.	Application of Foreign Law	220

III.
ANALYSIS
220

A.
British Columbia Law
221

1.	Contract Interpretation	221
2.	The “Factual Matrix”	222
3.	Promissory Estoppel	223
4.	Repudiation, Fundamental Breach, and Effect of Breach	223

B.	Summary of Parties' Arguments	225
C.	Status of the Agreements at the Time of Breach	225
D.	Responsibility for Taxes	225

1.	Whether the Taxes Include CCCM's Taxes	226
2.	Parties' Arguments	227
3.	The Articles of Agreement Bound RCMP to Pay Canadian Taxes Imposed on the Cruise Lines	227
4.	The Documents Incorporated in the Final Articles of Agreement Required RCMP to Pay the Cruise Lines' Canadian Taxes	231
5.	Promissory Estoppel	233
6.	Anticipatory Repudiation by Normande Morin	236
7.	Fundamental Breach	238

E.	RCMP's First Breach Argument: Provision of Charter Party Agreements	239
F.	RCMP's Second Breach Argument: CCCM's Inability to Obtain Financing	241
G.	RCMP's Third Breach Argument: Health Scores	244
H.	RCMP's Fourth Breach Argument: Canada versus United States Law in Charter Party Agreements	245

IV.
CONCLUSION
246

[967 F.Supp.2d 120]

Vancouver, Canada hosted the 2010 Winter Olympic Games. To ensure available hotel rooms for athletes, spectators, and staff, the Canadian government sought alternative housing for the Integrated Security Unit, a multi-agency task force headed by the Royal Canadian Mounted Police (“RCMP”). The Integrated Security Unit was responsible for ensuring the safety of visitors, athletes, and venues during the Olympic Games. RCMP found a creative low-cost solution to the lodging scarcity: it would house members of the Integrated Security Unit on cruise ships docked at Vancouver's Ballentyne Pier, using the ships as floating hotels for approximately six weeks. Through a competitive bidding process in 2008, Plaintiff Cruise Connections Charter Management 1, LP was selected as the broker to negotiate

[967 F.Supp.2d 121]

charters for ships that met RCMP requirements.

Well before the 2010 Olympics, the relationship between RCMP and Cruise Connections broke down completely. In this suit, each party blames the other for their failed agreement. Cruise Connections contends that RCMP reneged on its promise to pay certain taxes that Canada might impose on the cruise lines. Cruise Connections argues that RCMP's refusal to cover these costs made it impossible for Cruise Connections to finalize charter agreements and bank financing. RCMP insists that it never agreed to pay the taxes in dispute and that Cruise Connections breached its own contract obligations and missed key deadlines. Both parties now move for summary judgment, relying on an extensive written record consisting of the parties' written agreements, correspondence, depositions, and other (almost entirely) uncontested materials.

For the reasons set forth below, the Court finds that RCMP agreed to pay all Canadian taxes imposed on the cruise lines. When RCMP refused to acknowledge its commitment and then repudiated it, it breached the agreement between the parties in a distinctly fundamental way. In contrast, the claims of RCMP against Cruise Connections relate to duties that were not fundamental to the contract, were waived, or were provoked by RCMP's breach on tax payments. Summary judgment will be granted to Cruise Connections and denied to RCMP. The Court will set a bench trial to determine damages.

I. FACTS A. The Parties
1. Plaintiffs

Plaintiffs are Cruise Connections Charter Management 1, LP (a North Carolina limited partnership) and Cruise Connections Charter Management GP, Inc. (a North Carolina corporation). Cruise Connections Charter Management GP, Inc., is the general partner of the limited partnership, of which the limited partners are Michael Sloane; New West Group, LLC (an LLC organized by Mr. Tracey Kelly); and Issumavik Management Limited (an entity organized by Susan Edwards). See CCCM Organizational Documents, RCMP Motion for Summary Judgment [Dkt. 62] (“RCMP MSJ”), Ex. 7 [Dkt. 62–11].¹ Plaintiffs are referred to collectively as Cruise Connections or CCCM,² and references to the “CCCM partners” mean Ms. Edwards, Mr. Kelly, and Michael Sloane. Michael Sloane is also the president of Cruise Connections Charter Management GP, Inc., of which Mr. Kelly and Ms. Edwards are officers. Phillip “Bud” Sloane is the Chief Financial Officer of Cruise Connections Charter Management 1, LP, but not a partner. Decl. of Phillip Sloane (“P. Sloane Decl.”), January 15, 2013, CCCM Br. Opp'n RCMP MSJ (“CCCM Opp.”) [Dkt. 67], Ex. 3 [Dkt. 67–3] ¶ 2.

The legal entities comprising CCCM were established on May 23, 2008, immediately before CCCM submitted its bid to RCMP. See CCCM Organizational Documents at CCCM9535 (North Carolina Secretary of State certificate dated May 23, 2008); see also Deposition of Tracey Kelly (“Kelly Dep.”),³ RCMP MSJ, Ex. 2 [

[967 F.Supp.2d 122]

Dkt. 62–6]; Pls. Mot. Summ. J (“CCCM MSJ”) [Dkt. 60], Ex. 5 [Dkt. 60–5]; Defs. Opp. Pls. MSJ (“RCMP Opp.”) [Dkt. 66] Ex. 3 [Dkt. 66–5]; CCCM Opp., Ex. 9 [Dkt. 67–9]; RCMP Reply [Dkt. 69], Ex. 1 [Dkt. 69–2]; at 122–23 (stating that the CCCM partners agreed to form CCCM on May 17, 2008 and incorporated on May 23).

The CCCM partners' roles for the 2010 Olympics bid were: “Susan Edwards, VP Operations, Project Manager;” “Tracey Kelly, VP Sales and Marketing, Port and Ship Negotiations;” and “Michael Sloane, VP Administration.” See E-mail from Sue Edwards to CCCM Partners titled “Final ISU Bid,” with copy of CCCM Bid (“Bid”), RCMP MSJ, Ex. 17 [Dkt. 62–21], CCCM8248–8320 at CCCM8254; see also CCCM MSJ, Ex. 9 [Dkt. 65–4] (duplicate of Bid). None of the CCCM Partners is an attorney. The Bid listed Sue Edwards's profession as a “Project Manager, Team Leader, Event Specialist and [ ] Administrative Law Tribunal Member and Member Chair,” with previous experience chartering ships. Id. at CCCM8270. Ms. Edwards was a resident of Victoria, British Columbia, Canada. Id. at CCCM8271. A resident of Seattle, Washington, Mr. Tracey Kelly had worked in the cruise line industry for more than 20 years, including as Vice President of Sales at Holland...